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8 tips on how to pay off your home loan faster

Consistently low mortgage rates mean it’s the best time for home owners to pay extra dollars off now, saving thousands in the long run. Running some numbers in an online calculator will give you an idea of just how much you stand to save by committing to paying down your loan faster. For example, on a $300,000 30 year loan at 7% the minimum monthly repayment will be $1995. If you pay an extra $100 a month from the start, it will knock around 4 years off the loan and save you a huge $68,000 in interest. An extra $200 per month from the start will mean a repayment period over 7 years shorter and a saving of $116,000! It’s clear to see that small changes can make a big change when added up over the life of the loan. Here are our handy tips for getting mortgage-free faster.

1)     Get knowledgeable – sure, reading economists’ reports isn’t everyone’s idea of fun, but a little knowledge goes a long way. Take a moment to read the money matters section of a news website and it can give you solid insights into what the mortgage market is likely to do, letting you plan what to do with your Queenstown, Otago or Southland real estate loan – split, fix or float – make educated decisions, not stabs in the dark

2)     Negotiate – banks advertise rack rates but are often negotiable to secure business. Getting even a small discount can really add up 

3)     Change repayment frequency – if you pay monthly, consider changing your payments to fortnightly intervals instead. It’ll mean you end up actually paying an extra month each year off your mortgage, reducing the principal faster

4)     Make extra payments right from the start – if you can, it’s well worth paying extra from right at the beginning of the loan, as that’s when you pay the most interest. Any extra paid will come straight off the principal amount, hence your interest will start reducing right away. And remember, extra payments can be ad-hoc such as when you get a bonus (depending on the structure of your loan), or a consistent extra amount with each repayment 

5)     Pay extra fees up front – if your loan attracts establishment fees or Lenders Mortgage Insurance, try to pay them up front rather than including them in your loan. Why pay interest on them if you don’t have to 

6)     Make small savings work for you – think of a way to make extra payments based on what works for you. For example, saving all of your loose change and dedicating it all to the mortgage account. Or make your morning coffee instead of buying it – just based on workdays, that could be an extra $90-100 a month which would save you tens of thousands in the long run

7)     Don’t lower repayments when interest rates fall – yes, they’re low at the moment but they fluctuate a lot over time. It’s tempting to lower repayments when rates fall, but keeping them at their original rate will shave your principal much faster, and thus the amount of interest you pay too

8)     Don’t be afraid to look around – when fixed rates end, and even before they do, don’t be shy about looking around and seeing what’s on offer. Many banks offer great incentives to move, and it’s possible to secure a better deal than what you were on previously. Review where your loan is, what your priorities are and whether your financial situation is still the same – a mortgage broker or bank can help with this